Navios Maritime Partners Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 13, 2025

There are 7 speakers on the call.

Operator

Thank you for joining us for Navios Maritime Partners Fourth Quarter twenty twenty four earnings conference call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou Chief Operating Officer, Mr. Stratos de Cyprius Chief Financial Officer, Mrs. Eric Cironi and Vice Chairman, Mr.

Operator

Ted Petrone. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners Web site at www.naviosmlp.com. You will see the webcasting link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be found there. Now I will review the Safe Harbor statement.

Operator

This conference call could contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward looking statements are statements that are not historical facts. Such forward looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward looking statements. Such risks are fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks.

Operator

Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows: First, Ms. Frango will offer opening remarks. Next, Mr. Desipis will give an overview of Navios Partners segment data.

Operator

Next, Ms. Terrone will give an overview of Navios Partners financial results. Then Mr. Petrone will provide an industry overview. And lastly, we'll open the call to take questions.

Operator

Now I turn the call over to Navios Partners' Chairwoman and CEO, Ms. Angeliki Frangou. Angeliki?

Speaker 1

Good morning, and thank you all for joining us on today's call. I am pleased with our results for the full year and the fourth quarter of twenty twenty four. For the full year, we reported revenue of $1,330,000,000 of which $332,500,000 related to the fourth quarter. We also reported net income of $367,300,000 and $94,700,000 for the full year and the fourth quarter respectively. Earnings per common unit were $11.98 for the 2024 and $3.11 for the fourth quarter.

Speaker 1

Since the pandemic, our markets were driven primarily by geopolitical events of conflict in Ukraine and The Middle East. We don't know how these events will be resolved. We also don't know the extent to which nations will be subject to continuing or even expanded sanctions. In our view, the resolution of the conflicts in Ukraine and The Middle East may involve significant sanctions on oil producing nations, materially impacting world trade. In addition, the Trump administration has been vocal about its new tariff scheme, but has not yet provided a complete roadmap, so we cannot fully understand its inevitable impact on global trade.

Speaker 1

Please turn to Slide six. Navios Partners is a leading publicly listed shipping company with 176 vessels. These vessels have an average age of nine point eight years and are in three different segments and 16 asset classes. As you can see, the vessel value is approximately equal in each sector. We ended 2024 with a contracted revenue of $3,600,000,000 and $312,100,000 of cash on our balance sheet.

Speaker 1

We also entered 2025 well positioned as 63% of our 2025 available days are fixed. As a result, our breakeven is estimated at about $425 per open index day. Our net LTV as of the end of the fourth quarter was calculated at 34.8% resulting from a contraction in value primarily in the drybulk sector. Please turn to Slide seven. I would like to focus on our return on capital program.

Speaker 1

Under our dividend program, we paid $0.2 dividend per unit annually or $6,100,000 in total for 2024. In addition, in 2024, we purchased 489,955 common units for $25,000,000 under the unit repurchase program. Including dividends, we returned a total of $31,100,000 in 2024. Through 02/07/2025, we repurchased a total of 585,400 and 20 common units for $29,200,000 retiring 1.9% of the original float. As unit repurchases were well below estimated NAV, we effectively returned another $1.8 per unit of value to each unitholder through this NAV accretion.

Speaker 1

As of 02/07/2025, we have $70,800,000 available under unit repurchase program. The volume and timing of further repurchase will be subject to general market and business conditions, working capital requirements and other investment opportunities among other factors. Please turn to Slide eight, where we provide a sales and purchase update For the fourth quarter and twenty twenty five year to date sales, we generated $18,800,000 gross sales proceeds from the sale of two drybulk vessels with an average age of 18.7. We acquired one vessel for an effective price of $25,400,000 by exercising an option on a chartering vessel. We also received delivery of four previously announced new building vessels, three container ships and one tanker vessel.

Speaker 1

You can see the terms of the related charters on the slide. Contracted revenue update. We continue to focus on building contracted revenue, which is now calculated at about $3,600,000,000 We added $79,000,000 of contracted revenue as follows: $59,400,000 relating to tankers and $19,600,000 related to a container ship. Our operating cash flow potential remains strong. For 2025, we have an estimated breakeven of $425 per open index day with 37% of our fleet available days open or indexed.

Speaker 1

Please turn to Slide nine, where we focus on how we are executing on our strategy. We have achieved a 23% decrease in net LTV since year end 2022. In terms of fleet renewal and modernization, we have purchased 46 new buildings since the first quarter of twenty twenty one, of which 23 vessels have been delivered. We have also sold 33 vessels since the third quarter of twenty twenty two. We provide a view of the evolution of our fleet through selected metrics.

Speaker 1

As you can see, our fleet is the same size as it was in the year end 2022. Our fleet age remains about the same. We maximize energy efficiency by maintaining a fleet of useful vessels with the latest technology. In addition, as you can see from vessel value, the steel value of our fleet has increased by about 34% since the end of twenty twenty two. I would also note that these steel values do not give any consideration to a $3,600,000,000 contracted revenue.

Speaker 1

We present at the bottom of this slide the average analyst estimate of the company's NAV per unit for the period starting fourth quarter twenty twenty two and ending fourth quarter twenty twenty four. Navios per unit NAV increased by $32.2 to $143.2 an increase of 29% over the two year period. I'll now turn the presentation over to Mr. Stratos Esipress, Navios Partners' Chief Operating Officer. Stratos?

Speaker 2

Thank you, Giligan. Good morning all. Please turn to Slide 10, which details our operating free cash flow potential for 2025. We fixed 63% of our available days at the net average rate of $26,198 per day. Contracted revenue almost covers our total cash expense for the year, leaving an estimated breakeven of $425 per open index day.

Speaker 2

We have twenty one thousand and eighteen remaining open or index linked days that should provide substantial cash flow. So that you can perform your own sensitivity analysis, on the right side of the slide, we provide our fifty six thousand three hundred and eighty seven available days by vessel type. Please turn to Slide 11. We are constantly renewing our fleet in order to maintain a young profile. We reduce our carbon footprint by modernizing our fleet benefiting from new technologies and advanced environmentally friendly features.

Speaker 2

In Q4 and so far in Q1, we took delivery of four vessels, two five thousand three hundred TEU container ships, all charter out for an average period of five point three years at an average net daily rate of 36,818 one LR2 Aframax vessel, which has been chartered out for five years at $25,253 net per day and our first seven thousand seven hundred TEU LNG dual fuel containership, which is chartered out for twelve years at an average rate of $41,753 per day. Following these deliveries, we have 23 additional newbuilding vessels delivering to our fleet through 2028, representing $1,600,000,000 of investment. In container ships, we have five vessels to be delivered with a total acquisition price of about $600,000,000 We have mitigated this risk with long term credit worth charters expected to generate about $500,000,000 in revenue over six year average charter duration. In tankers, we have 18 vessels to be delivered for a total price of approximately $1,000,000,000 We chartered out 14 of these vessels for an average period of five years expected to generate aggregate contracted revenue of about $700,000,000 We have also been opportunistically replacing older vessels. In 2024 and 2025 to date, we sold 11 vessels with an average age of seventeen point eight years for about $2.00 $2,000,000 At the same time, we exercised purchase options on five charter in Japanese built drybulk vessels with an average age of eight years for a total price of $142,000,000 dollars Moving to Slide 12, we continue to secure long term employment.

Speaker 2

In Q4 in twenty twenty five year to date, we created about $79,000,000 additional contracted revenue. Approximately $20,000,000 is from container ships and about $59,000,000 from tankers. Our total contracted revenue amounts to $3,600,000,000 1 point 4 billion dollars relates to our tanker fleet, dollars $200,000,000 relates to our drybulk fleet and $2,000,000,000 relates to our container ships. Charters are extending through 02/1937 with a diverse group of quality counterparties. I now pass the call to Erichironi, our CFO, who will take you through the financial highlights.

Speaker 2

Erich?

Speaker 3

Thank you, Stratos, and good morning all. I will briefly review our unaudited financial results for the fourth quarter and year ended 12/31/2024. The financial information is included in the press release and summarized in a slide presentation available on the company's website. Moving to the earnings highlights on Slide 13, total revenue for the fourth quarter of twenty twenty four increased to $333,000,000 compared to $327,000,000 for the same period in 2023 due to higher fleet time charter equivalent rate and available days. Our fleet TCE rate for the fourth quarter of twenty twenty four increased by 2.6% to 23,205 per day compared to Q4 twenty twenty three and our available days increased by 1.1% to thirteen thousand six hundred and seventy one days.

Speaker 3

In terms of sector performance, the TCE rate for our drybulk fleet and our container fleet increased by approximately 1% to $17,079 per day and $30,623 per day respectively. In contracts, the time charter rate for our tankers was was approximately 3% lower at twenty six thousand six hundred and forty six dollars per day. EBITDA was adjusted as explained in the slide footnote. Excluding this amount, adjusted EBITDA for Q4 twenty twenty four decreased by $45,000,000 to $182,000,000 compared to Q4 twenty twenty three. Please note that the '23 figures include the prepayment of charter high received by our charters, of which $47,000,000 relates to periods from 2024 onwards.

Speaker 3

Net income for Q4 twenty twenty four was $95,000,000 Total revenue for the full year 2024 increased by $27,000,000 to $1,330,000,000 compared to 2023. The increase in revenue was mainly a result of higher fleet time charter equivalent rates despite slightly lower available days. Our 2024 fleet TC was $22,924 per day. In terms of sector performance, TC rate for our drybulk fleet increased by 18% to $16,959 per day compared to 2023. In contrast, TCE rates for our containers and tankers were approximately 105% lower respectively.

Speaker 3

For 2024, TCE rates for our containers stood at $30,370 per day and for our tankers at $27,093 per day. Adjusted EBITDA for the year 2024 decreased by $16,000,000 to $732,000,000 compared to last year. Excluding the $47,000,000 prepayment mentioned earlier, 2024 EBITDA would have exceeded 2023 levels. Net income for 2024 stood at $367,000,000 Earnings per common unit for the fourth quarter and full year 2024 were $3.11 and $11.98 respectively. Turning to Slide 14, I will briefly discuss some key balance data.

Speaker 3

As of 12/31/2024, cash and cash equivalents, including restricted cash and time deposits in excess of three months by $312,000,000 During the year, we paid $282,000,000 under our new building program, net of debt. We concluded the sale of 10 vessels for $190,000,000 adding about $128,000,000 cash after debt repayment. Long term borrowings, including the current portion, net of deferred fees, increased by $267,000,000 to $2,100,000,000 mainly as a result of the delivery of 12 newbuilding vessels for which the respective delivery installments were paid with debt. Net debt to book capitalization slightly increased to 34.7%. Slide 15 highlights our debt profile.

Speaker 3

We continue to diversify our funding resources between bank debt and leasing structures. 28% of our debt has fixed interest rate at an average rate of 5.5%. We also have mitigated part of the increased interest rate cost by reducing the average margin for the floating rate debt for the in the water fleet to 2%. I would like to note that the average margin for the floating rate debt for our newbuilding program is 1.5%. Our maturity profile is staggered with no significant balloons due in any single year.

Speaker 3

In Q4 twenty twenty four, Navios Partners entered into two new credit facilities for up to $120,000,000 to refinance existing indebtedness of 11 vessels. In addition, we completed a $16,000,000 sale and leaseback facility for one vessel. Finally, recently Navios Partners agreed to enter into an export grade detention pack facility for a total amount of up to $148,400,000 in order to finance part of the acquisition cost of two new buildings, 7,903 EU container ships currently under construction. The facility matures twelve years after the delivery date of each vessel and bears interest at Sofra plus 125 basis points per annum. The facility remains subject to completion of definitive documentation is expected to close the first quarter of twenty twenty five.

Speaker 3

I now pass the call to Ted Petrone to take you through the industry section. Ted?

Speaker 4

Thank you, Ari. Please turn to Slide 17. On February 1, the U. S. Announced additional 10% tariffs on all existing duties for all products imported from China.

Speaker 4

On February 4, Beijing announced additional tariffs of 10% to 15% on U. S. Goods, including coal, LNG, crude oil, agricultural machinery and large autos. At this time, the announced tariffs are not expected to have a significant effect on global trade as the combined U. S.

Speaker 4

China tariffs equal approximately 90,000,000 metric tons equal to only about 0.7% of global seaborne trade. On February 1, U. S. Announced 25% tariffs on Canada and Mexico for all products imported from each country except for energy and energy resources coming out of Canada. The tariffs on Canada and Mexico were postponed one month after discussions between the leaders of each country.

Speaker 4

The situation is fluid and bears monitoring as there is a potential for further escalation should the expected negotiations not be successful. Please turn to Slide 18 for a review of current trade disruptions. The Red Sea entrance leading to the Suez Canal strategic maritime transit point continues to operate at restricted transit levels. In fact, the February registered the lowest transit 173 vessels since November of twenty twenty three. Red Sea disruptions have caused a rerouting of ships via the Cape Of Good Hope, increasing cost and distances.

Speaker 4

In 2024, total ton or TEU mile increases per segment were estimated to be approximately 18% for containers, 1.5% for crude tankers, eight percent for product tankers and 5% for dry bulk. Should the situation remain unchanged in 2025, total ton or TEU miles for all sectors are projected to experience only slight variations. Panama Canal transients are essentially back to normal numerically with slight restrictions on certain vessels drafts. Please turn to Slide 20 for review of the tanker industry. World GDP is expected to grow by 3.3% in 2025 based on the IMF's January forecast.

Speaker 4

The IEA projects a 1,000,000 barrel per ton increase in global oil demand in 2025. Chinese crude imports slowed in 2024, averaging about 11,100,000 barrels per day, down 2% or about 200,000 barrels per day compared to 2023. After a seasonally slow Q3, Q4 played out in a similar softer fashion on the back of the above mentioned slowing Chinese crude oil demand and OPEC plus delaying the unwinding of the 2,200,000 barrels per day voluntary export cuts from December 1 until 04/01/2025. The BDTI averaged 9.56 for Q4, basically unchanged from Q3, while the BCTI averaged 5.71%, some 18% below Q3. However, in all cases, rates remained in line with long term averages.

Speaker 4

Recent changes to U. S. Policies regarding tariffs and sanctions are dealt with in Slide seventeen and twenty one. Overall, these changes along with normal seasonality and low global oil inventories should support crude freight rates going forward. Please turn to Slide 21.

Speaker 4

January 10, 20 20 five, the U. S. Office of Foreign Assets Control, OFAC issued new sanctions targeting Russian oil revenue with The U. S. Adding 186 ships mostly trading Russian oil to its sanctions list.

Speaker 4

OFAC's action more than doubled the sanctioned vessels. As per the chart on Slide 21, the total crude fleet now sanctioned is 9%. Both China and India have said they will not allow OFAC sanctioned vessels to discharge, leading the market to charter vessels from the regular fleet. The LCC spot rates for Middle East Gulf to China as of February 11 are about 40% higher than January 9. That is the day before OFAC sanctions were announced.

Speaker 4

Additionally, on 02/04/2025, the U. S. Reinstated the maximum pressure campaign against Iran. It instructs U. S.

Speaker 4

Agencies to rigorously enforce existing economic sanctions and introduce new measures targeting Iran's oil exports with the goal of reducing them to zero from its 1,400,000 barrels a day exports registered this past January. Turning to Slide '22, as previously mentioned, both crude and product rates remain at healthy levels due to solid supply and demand fundamentals and shifting trading patterns. Crude ton miles are expected to grow 1% in 2025. Product ton miles, however, are expected to decline 0.5 in 2025. This percentage increase incorporates continued Red Sea restrictions in 2025.

Speaker 4

Turning to Slide '23, the VLCC fleet contracted 0.2% in 2024 and is expected to be similarly negative in 2025. The decline can be partially attributed to owner's previous hesitant to order expensive long lived assets in light of engine technology concerns due to CO2 restrictions enforced since the beginning of 2024. The current order book is 9.6% of the fleet or 87 vessels after a record ordering spree in 2024. Vessels over 20 years of age are about 19.8% of the total fleet or 181 vessels, which is over two times the order book. Turning to Slide '24.

Speaker 4

Product tanker net fleet growth was 1.7% for 2024 and is expected to be 4.3% in 2025. The current Product Tanker order book is 21.3% of the fleet and compares favorably to the 19.1% of the fleet, which is 20 years of age or older. In concluding the tanker sector review, tanker rates across the board continued at healthy levels, the combination of moderate growth in global oil demand, OFAC sanctioned new longer trading routes for both crude and product tankers and the IMO twenty twenty three regulations should provide for healthy tanker earnings going forward. Please turn to Slide 26 for review of the dry bulk industry. Expectations for a seasonally strong Q4 started well with the BDI standing at 2,084 on October 1.

Speaker 4

However, slowing Atlantic exports along with unwinding congestion contributed to the index ending the quarter at nine ninety seven, percent, some 52% below its start. All three asset classes reached their lowest levels in December. Capes led the way in Q4 down approximately 68% with Panamaxes and Supers down both about 33%. The yearly average BDI ended 2024 at $17.55 up 27% year on year, but approximately 21% below its twenty year average. Drybulk trade is expected to grow at 0.6% in 2025, enhanced by about 0.9% increase in ton miles.

Speaker 4

Most of this growth is anticipated to come from additional Atlantic exports of iron bauxite, the vast majority destined for China and Southeast Asia. With Nestle growth projected to outpace trade growth in 2025, supply and demand fundamentals have weakened. However, the growing bauxite trade to relatively low order book as compared to overage vessels and tightening GHT emission regulations remain positive factors. Please turn to Slide 27. Current order book stands at 10.5% of the fleet.

Speaker 4

Net fleet growth is expected to be 3% in 2025. As owners remove tonnage, that will be uneconomic due to IMO 2023 CO2 rules. Vessels over 20s of age are about 11.7% of the total fleet, which is slightly higher than the order book. Concluding our dry bulk sector review, slowing growth in demand from natural resources should be balanced by restrictions in transiting the Red Sea, longer haul trades of bauxite and INR from West Africa to Southeast Asia and a low pace of newbuilding deliveries should support freight rates going forward as the freight futures market currently indicate. Please turn to Slide 29 for a review of the container industry.

Speaker 4

The Shanghai Container Freight Index, SCFI is currently at eighteen ninety seven, which matches the opening index of 2024 and approximately 49% down from its peak of 37.34 in 07/05/2024, which was the highest level outside the pandemic era. In contrast to the previously mentioned box rates, container ship rates remained firm on the back of continued rerouting of vessels away from the Red Sea and around the Cape Of Good Hope, causing TEU miles to increase by about 18% this year. Firm time charter rates should remain the duration of the Red Sea disruption. However, continued record newbuilding ordering and record fleet growth should eventually modify these gains and reverse course when the Middle East conflict finally settles and liner companies are certain of safe passage in the Red Sea. Although trade is expected to grow by 2.8% in 2025, net fleet growth of 10.1% in 2024 followed by 5.9% in 2025 should eventually pressure rates downward.

Speaker 4

Turning to Slide 30, the current order book stands at 26.8% against 13.9% of the fleet 20 years of age or older. About 80% of the order book is for 10,000 TEU vessels or larger. In concluding the container sector review, should Suez Canal Transits return to previously normal levels, supply and demand fundamentals will be challenging when combined with geopolitical uncertainties and continuing elevated order book. However, our world GDP growth of 3.3% for 2025 and ongoing strength in The U. S.

Speaker 4

Economy provide a positive counterpoint for a challenging 2025. This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments.

Speaker 1

Angeliki? Thank you, Ted. This completes our formal presentation and we open the call to questions.

Speaker 5

Thank you. And we will take our first question from Omar Nakda with Jefferies. Please go ahead.

Speaker 6

Thank you. Hey guys, good afternoon. Thanks for the detailed update as usual, always very much in-depth. One of the you know Angelique in your opening comments you mentioned all the uncertainty in the market these days and obviously that's always been the case but just seems like it's just brewing clearly you know with tariffs sanctions you know conflicts in The Middle East and Russia it's all leading to a lot of unknowns. How has that sort of affected your business?

Speaker 6

Has this caused you to change anything in terms of how you're operating or in terms of capital deployment or shareholder rewards? Any color you can give on that front?

Speaker 1

I think that's a very good question. Mark, good morning. The big thing is you saw a solid results for 2024. Looking at 2025, I mean, as a company, we did a whole strategy and you see that you don't have the economic factors, but you have a lot of geopolitical events that how they will be resolved will have such a very important it can be very important drivers for our business from Ukraine conflict, Middle East with the Red Sea and Iran. And additionally, then you have the tariffs.

Speaker 1

I can give you, take for example, the last days of the Biden administration, you had sanctions sanctions on the dark fleet. That meant by off act. That meant 9% of the tanker fleet was basically removed as much as inefficiency was. And then you can have an event where a Red Sea opens, which we haven't seen it yet. This kind of event can really substantially change the market on one sector of the other.

Speaker 1

So

Speaker 6

the

Speaker 1

big benefit of Navios is your diversified fleet, I mean a big pillar of stability, our $3,600,000,000 of contracted revenue, we have time to think, and our breakeven per day of $425 with two thirds of our days contracted. And a lot of our open days, which are drybulk, being indexed with our ability to really see the forward market and be able to capture the upside. So basically, you need to watch. If you can tell me how these events will unfold or how tariffs will be applied, it can have a quite significant differences on the market perspective of either tanker, dry bulk or containers. I mean Ted had nine minutes going through the different sectors.

Speaker 1

I can tell you there is infinite possibility.

Speaker 6

Yes. Yes. No, definitely. Yes. That's a great point.

Speaker 6

And obviously, a benefit of diversification where you're not just stuck bracing for one outcome. I guess, maybe just in terms of in container shipping and 2024 was amazing in terms of freight rates and then chartering activity. Obviously, we come into 'twenty five, the market's still relatively tight given the diversions from the Red Sea. What is the how would you characterize your customer base at the moment in terms of charge ring habits? Is there still an elevated level of interest to secure vessel capacity or has that waned given all this uncertainty?

Speaker 1

No. If you take that from the majors, from the liner companies, you see that there is an appetite for tonnage. There is an appetite for duration and we have seen it all over. I mean, there was basically anything we have seen on Red Sea is not it has not changed this view. We have not seen the Suez Canal opening because there is still a lot of uncertainty.

Speaker 1

We are talking about security of the crew, I mean, cargo and vessel. So I don't think that you will see quickly unless you see a stable environment, you will not see a change on this.

Speaker 6

Okay. Great. Sorry, go ahead. Continue.

Speaker 1

No, I was just saying that it will still continue to go around a decade. So basically, you still have that.

Speaker 6

Yes. That makes sense. Well, great. Thanks, Angeliki. I really appreciate the comments.

Speaker 6

I'll turn it over.

Speaker 5

Thank you. And it appears that we have no further further questions at this time. I will now turn the program back to Angeliki for any additional or closing remarks.

Speaker 1

Thank you. This completes our quarterly results. Thank you.

Speaker 5

Thank

Powered by Quartr
Earnings Conference Call
Navios Maritime Partners Q4 2024
00:00 / 00:00